TEXT-S&P release on Titan Petrochemicals Group Ltd

(The following statement was released by the ratings agency)

Sept 3 - Standard & Poor's Ratings Services said today that it had lowered its long-term corporate credit rating on Titan Petrochemicals Group Ltd (1192.HK). to 'B-' from 'B'. The outlook is negative. At the same time, Standard & Poor's lowered the issue rating on US$400 million senior unsecured notes guaranteed by Titan to 'CCC+' from 'B-'.

"The rating actions reflect a significant weakening in Titan's financial and business risk profiles in the first half of 2008. An operating loss of Hong Kong dollar [HK$] 292 million, coupled with an expected significant increase in debt to fund the aggressive growth strategy associated with its shipyard business, will likely put Titan under continued financial pressure over the next 12 months," said Standard & Poor's credit analyst Lawrence Lu. "In addition, the company's weak financial performance led the company to be in non-compliance with three bank loan covenants, although the related loans are small in amount. Titan has obtained two waivers from the banks, and another waiver is still in process."

Standard & Poor's sees risks in the group's strategic direction, and its lack of a track record and earnings visibility for its growth business in onshore oil storage and shipyard operations. Its onshore storage business achieved positive EBITDA in the first half of 2008, but still relies heavily on spot contracts, which are volatile in nature. Titan's ship-building business continues to rely on orders from related parties. Although Titan introduced Kawasaki Kisen Kaisha as a strategic partner and long-term customer for its ship-repair business, following a US$25 million equity injection, the amount is small compared with the additional HK$2.0 billion funding Titan requires to complete the construction of its shipyard.